Balanced fund are a type of funds which does not take full exposureeither in equity or in debt. It invests in both equity and debt in awell defined ratio as per the fund's mandate.These funds are alsocalled as hybrid funds. Equity Oriented Hybrid Funds These funds usually invest in the ratio 60:40(equity : debt) or 75:25(equity : debt). This is suitable for investors who wants to getbenefited from the equity market but at the same time would not liketo risk his entire money with equites. These funds perform better thanequity funds during the downturn in markets and have a better shieldin terms of debt component. In case of downturn, these funds increase their debt component toreduce the impact of falling market in the fund's NAV.Similarly duringa bull run, these fund will increase their equity exposure to getbenefited from the bull run. So a moderate risk investor can choosethis fund to have a balanced return. Debt Oriented balanced Mutual Funds The pension funds are typical example of debt oriented balanced mutualfunds. These have a big chunk(>70%) of their portfolio in debtinstruments. These funds are designed to get returns from debtinstruments but have a small portion invested in equities to get thatadditional kicker return to outpace typical fixed income instrumentslike bank FDs.In order to get an edge over typical debt instrumentsand also provide investor an extra bit of return, they have a limitedexposure to equities. So an investor in the age range of >30 who has dependents and whocan't take high level of risk, can opt for balanced fund to bring instability to his portfolio. Subbu.http://investorskool.blogspot.com/
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